Great Basin Sees Big Future In Nevada

SITE VISIT

ELKO, NEVADA — In the dry, rolling hills of southeast Nevada, Great Basin Gold (GBG-X) has sought out epithermal expertise and underground experience to develop a profitable, safe gold mine, chasing narrow, high-grade veins into the hills.

To process the ore from that mine the company purchased an old mill nearby, at a steal of a deal, and in short order realized the mill came on a property loaded with upside potential.

And while the company’s Nevada properties continue to churn out gold and reveal their potential, Great Basin is also in the midst of building a significant underground gold mine in South Africa that will boost its gold output to 375,000 oz. annually by 2012.

2009 was a busy year for Great Basin and this year promises more of the same. But when exploration keeps transitioning to production, it is easy to keep working hard.

High-grade mining at Hollister

The Hollister property is at the northwest end of Nevada’s famous Carlin Trend. The Carlin Trend truly deserves its renown, as numerous open pit and underground mines have extracted some 75 million oz. gold from the trend over the last 40 years.

Most of the Carlin Trend’s precious metal mineralization sits within the Eocene-era Hatter Stock, a rock group formed roughly 40 million years ago. At Hollister, however, the targeted system is much younger. Some 15 million years ago the crustal plate ripped, forming what is now known as the Northern Nevada rift, and a highly active hydrothermal system filled the void with volcanic rocks. The remnants of the hot springs system are still apparent on surface, at least to a geologist’s eye, in the form of fossilized, near-circular hydrothermal vents or geysers surrounded by silica-enriched rock.

The hydrothermal activity around Hollister did not only bring gold. For thousands of years, the district was a source of opalite for Native Americans, who used the hard stone in tools and weapons. Then, during the First World War and again between 1929 and 1943, the Hollister area produced more than 2,000 flasks of mercury. The presence of mercury, which was introduced in the same hydrothermal event that brought gold, is still used to track gold.

The targets at Hollister are primarily epithermal veins. Small zones of disseminated gold exist on surface and large disseminated deposits, like those found along the rest of the Carlin Trend, may exist at depth. However, within the upper kilometre of ground, gold is held almost exclusively in veins that run along and splay out from fault structures.

Finding those structures from surface requires an eye trained to identify silica textures. Homogeneous silica minerals, formed at low temperatures, change into altered, rebrecciated, overturned silica near old geysers. Drilling down into the structures usually reveals vein swarms and breccias in the upper levels of a mineralized zone, followed by more discrete veins deeper in the system.

Great Basin is currently mining the Clementine and Gwenivere vein systems, which have been traced for almost 1 km along strike. The Clementine system is above the Gwenivere system; the two run east-west at between 150 and 200 metres depth. The mineralized vein systems spread across 450 metres width, with individual veins averaging just over 1 metre width, and demonstrate almost the same continuity vertically.

Within the main Hollister veins Great Basin has defined a measured and indicated resource of 1.01 million tonnes grading 40 grams gold per tonne and 294.6 grams silver per tonne. Inferred resources add 939,200 tonnes averaging 46 grams gold and 93.2 grams silver. The system comprises 19 discrete veins and is still open along strike and at depth.

Clementine and Gwenivere occasionally demonstrate their true strength by generating whopper samples. A few Clementine face samples, for example, came back grading over 2,000 grams gold. And recent drilling on the Gwenivere vein returned intercepts 0.2 to 3 metres in length grading between 300 and 2,150 grams gold per tonne.

The operation is currently producing roughly 400 tonnes of ore each day. One access decline feeds into three working levels. To minimize dilution Great Basin uses four different mining methods. As Paul Huet, general manager for Hollister, describes it, “To use one mining method across the system would not give it any justice.”

The most common mining method at Hollister is cut-and-fill stoping. The company tries to keep stopes narrow, as in less than 1 metre, to minimize dilution. In fact, miners who keep stopes below a specified width while chasing a particular vein are eligible for a bonus. Miners work a 150-foot section and move the working level up 6 feet with each round. The stope is filled with expanding concrete after the ore is scraped away.

One of the main advantages of cut-and-fill stoping is its flexibility — if miners encounter an unexpected ore splay, the fact that previous, lower stopes are filled with concrete means they can chase the unexpected. A less expensive but also less flexible method is shrinkage stoping, which is very similar to cut-and-fill but excludes the step of backfilling with concrete.

The least expensive mining method used at Hollister is long hole stoping. Adits driven across the vein provide access for drills, which punch lengthy holes down the vein to a lower adit. Explosives in a set of parallel holes down the vein blast the ore to bits, which are collected by a loader and driven to surface. This method requires the least skilled labour, hence its low cost, and Great Basin is looking for more opportunities to implement long hole mining but it can only be used on veins that run very straight and average more than 2 feet in width.

The fourth and final mining method used at Hollister is thermal fragmentation. Particularly good for narrow, straight veins, the thermal fragmentation process starts like long hole stoping. Holes are drilled from an upper adit to a lower one, through the vein. Then a powerful burner, run by diesel, heats the rock to about 1,800°C, causing the rock to spall. Spalling is when an unequal expansion of different crystals within a rock overcomes molecular cohesion. Spalling widens a 15-cm hole to 90 cm; the broken ore within the hole can than be blown out using compressed air. Ore remaining between the large holes can be extracted using soft explosives. Hollister is the first operation in the United States to use thermal fragmentation, though Russian miners have used it for 40 years in large open pit mines to create large blast holes. The method’s key advantage is its accuracy — it enables miners to have excellent control over mining width and dilution.

By mixing and matching four mining methods, with a constant goal of minimizing dilution, Great Basin has been able to keep its cash costs over almost two years of operation to just US$315 per oz., net of silver credits.

“Instead of going in with a shotgun, we want to pick and choose our ore carefully,” said Ferdinand Dippenaar, president and CEO of Great Basin. “Mining gold is all about margin.”

Great Basin knew it had the makings of a healthy mine at Hollister but gold-bearing rock is no use without a mill. Rather than building another new mill in Nevada, the company searched high and low for one to buy and finally found one at Esmeralda. For just US$2 million the company picked up a fully permitted mill 356 km away from Hollister. For another US$11 million Great Basin refurbished and commissioned the facility, which is now churning through 350 tonnes of ore daily. It takes a truck 14 hours to run a round trip from Hollister to Esmeralda and back.

In the future, Great Basin hopes to increase daily through capacity at the mill by expanding the milling circuit, which is the current bottleneck. At present, however, the limited level is fine because there are only three active working stopes at Hollister presently, which means mine output is also limited to
roughly 400 tonnes a day.

The refurbishment effort included installing a thickener, adding a lime ball mill, and expanding the mill building to accommodate a Gekko gravity-flotationinline leach reactor circuit. The Gekko circuit significantly increased the mill’s recovery capabilities; before, gold recovery depended on the action of a carbon-in-leach (CIL) circuit on milled rock. Now the CIL circuit is a bonus, leaching out gold remaining after the Gekko process. Gold recoveries now average 93% while silver recoveries near 82%.

“The mill facility is great, but the real key to recoveries here is grade control,” says Dario Clemente, a consultant working with the company. “Ore is assayed three times at Hollister so we can get the right mix going into the mill. If the grade gets too high we start to lose it out in the tails.”

In 2009 Great Basin produced roughly 115,000 oz. gold equivalent from Hollister.

Exploration Upside

Great Basin’s team cannot complain about a lack of exploration targets. If the company’s geologists were to complain about anything, it would be about not having enough time to explore all the targets on their list.

The current exploration focus is at Hollister, where defining new reserves will extend the life of an operating mine.

“We want ounces, not tonnes,” says Huet. “And we know that what we’ve defined already is just a small part of what is here.”

The company’s results at the Hatter Graben target give some support to Huet’s statement. Hatter Graben starts roughly 500 metres east of the current Hollister workings, at Clementine and Gwenivere, across the Antelope Creek fault zone.

Great Basin’s first hole into Hatter Graben was essentially a 1.5-km step out from the end of the underground workings. The hole hit, as did many in its wake. The Hatter vein trend is characterized by vein swarms and breccias in its upper portion, followed by more discrete veins deeper down. Some of the best intercepts from Hatter include 0.7 metres grading 35 grams gold and 3.8 metres carrying 16 grams gold. The target has been traced along 1,400 metres strike and across 450 metres width.

The Hatter vein trend is deeper than the Clementine and Gwenivere veins, starting roughly 600 metres below surface. Great Basin’s plan is to extend a decline from the current underground workings to the Hatter zone. At first the decline will provide access for underground exploration; later it would form part of the mining infrastructure.

Another important exploration target at Hollister is the West Lateral area, which is essentially the west strike extension of the Clementine and Gwenivere veins. Underground drilling into this area from the western extent of the workings has returned such high-grade hits as 0.7 metres grading 108.2 grams gold and 673 grams silver and 0.2 metres carrying 128.6 grams gold and 566 grams silver.

To assist in developing this area Great Basin is driving a second raise. This second major access point will ease exploration while also improving ventilation.

Then there is the exploration potential around the Esmeralda mill. Various operators have pulled gold from the Esmeralda mine since 1862, with production totalling almost 2 million ounces. Most recently, Metallic Ventures Gold (MVG-T) purchased the project in 2000 and worked hard to consolidate a healthy land package around the mine. The junior commenced mining in January 2004. But, because the company misinterpreted the geology as a bulk tonnage target rather than a vein operation, it was put on standby just nine months later.

When Great Basin purchased the mill and land package, in what U.S. exploration manager, Brian Morris describes as a “fire sale”, the company was only interested in the mill. When they realized the exploration upside on the surrounding property Great Basin’s geologists were floored.

“We’re amazed at some of the exposed veins that we can touch right now,” says Huet. “Some of the underground grades are pretty phenomenal.”

Mineralized veins on surface cutting through Miocene felsic volcanics initially drew miners to Esmeralda. Those veins, which outcrop in the southwest corner of the property, have been tapped via three open pits. Moving northeast, however, the felsic volcanics are covered by a younger Tertiary basalt flow that obscures other veins from surface exposure.

Moreover, a north-south fault has dropped the eastern stratigraphy down some 150 metres. The combined result, of the down-dropping and the basalt cover, is that the 3 km of strike between the old open pits and another small vein outcrop in the Ann area is completely unexplored.

Morris believes the veins in the southwest continue, along their northeast strike, the entire 3 km, and plans to complete a set of drill holes to test his theory as soon as possible. When that will be, is another question. Though, as the company knows it cannot dilute its focus on Hollister with work at Esmeralda.

“Exploration here is easy but we know what comes with easy — you go off and drill and drill and drill, and that would come out of our treasury,” says Dippenaar. “Right now we have to stay focused on Hollister. Ideally, we can start mining at Esmeralda and the revenue from that can fund exploration.”

Even though it may be a few years before they can jump into it, Morris and his team remain excited about their Esmeralda exploration plans.

“I’m in awe of the amount of alteration and silica I see here,” says Morris. Then, asked how he plans to explore for this hidden potential, he says with a smile, “If you’re going to eat an elephant, it’s one bite at a time.”

If Great Basin does embark on mining at Esmeralda in the future, it plans to make use of lessons learned and work done at the site already. The main lesson is that mineralization at Esmeralda is within a narrow, high-grade vein system, not within a disseminated, bulk-tonnage system. Metallic Ventures failed at Esmeralda because the company tried to mine veins, which average 1-3 feet in width, with 6-foot wide loaders. Metallic’s miners “diluted themselves out” as Morris puts it. Great Basin, on the other hand, prides itself on minimal dilution at Hollister.

“We’re experts in narrow vein mining — it’s what we’ve done our whole lives,” says Huet. “We can definitely mine this thing.”

Realizing its mistake, Metallic Ventures eventually switched to underground development. Though the switch came too late to save its effort, the development already complete at the Prospectus zone left behind stopes ready to be mined and ore sills ready to be excavated. Prospectus houses five raises that provide access to the upper portion of the deposit. Great Basin is currently dewatering the Prospectus workings, using the water to feed the Esmeralda mill.

“There is an opportunity to access areas where development is complete, rehabilitation is minimal, and the ore is high grade, providing a low-cost mining start-up,” says Huet. “Then, revenue generated from bulk sampling could help pay for underground drilling, mapping and sampling.”

Using historic sampling and drill results, which show 2-foot veins grading up to and above 70 grams gold, Great Basin commissioned a preliminary resource estimate for Prospectus, and specifically just for the areas already developed. The result: 76,300 tonnes sit ready to mine, at an average grade of 26.9 grams gold, for 66,000 oz.

And Great Basin already holds the permits needed to restart mining at Esmeralda, up to 127,700 tons per year.

Delving Into South African Gold

Great Basin has another major project, on the other side of the globe. In South Africa’s Witwatersrand Basin, Great Basin is developing an underground gold mine that will produce 254,000 oz. gold annually once it is up and running. Based on current resources of 54 million measured and indicated tonnes grading 6.67 grams gold plus 11.8 million inferred tonnes averaging 12.14 grams gold, the operation is expected to run for 19 years and produce just over 4 mill
ion oz. gold.

The Burnstone goldfield is defined by a 18-km long mineralized corridor hosting the Kimberley reef, on four main gold-bearing units in the Witwatersrand Basin. At Burnstone, the central portion of the gold corridor has been uplifted by two northwest-trending faults that left a significant portion of the deposit at a relatively shallow depth, between 200 and 750 metres below surface.

Great Basin expects to start commissioning Burnstone near the middle of 2010.

Great Basin raised $126.5 million in a debenture financing in November, after raising $130 million in a March offering. Those funds, along with access to a US$1.06-million senior debt facility, financed development of Burnstone.

In 2010, Great Basin’s share price has ranged between $1.80- $2. The company has a 52-week trading range of $1.11-$2.38 and has 334 million shares outstanding, 437 million fully diluted.